AGCO bids for Polish tractor company.

AGCO seems to be aiming for a foothold in the growing eastern European tractor market by making a bid to acquire Ursus, the Polish state-owned tractor manufacturer. Other companies have shown interest in Ursus, according to reports from Ursus general manager Janusz Sciskalki, but it seems only AGCO is prepared to bid for the entire business, which includes tractor, metallurgy and trading divisions.

The tractors Ursus makes are low-technology units in the 40hp to 120hp range. The smaller models are based on elderly Massey Ferguson designs.

Buying Ursus would give AGCO ready access to eastern European markets where demand for tractors and other agricultural equipment is expected to grow substantially over the next few years. It would also be a move towards the company's expansion ambitions in Europe.

According to a report in the UK's Financial Times, AGCO chairman and CEO Robert Ratliff wants to lift annual sales from last year's $2.1 billion to $5 billion by early next century and foresees sales outside North America growing from 60 percent to 75 percent. To do that, AGCO needs another substantial European business, preferably a tractor maker, as an additional brand to run alongside Massey Ferguson.

Further rationalization of western Europe's tractor manufacturing industry will doubtless come, but Ursus is one of the few immediate candidates for AGCO cash. The Financial Times reports that AGCO's European acquisition targets will have ruffled a few corporate feathers, as Renault, Same Deutz-Fahr, Sisu-Valmet, Landini, Fendt, Dronningborg and Claas are considered principal candidates for the billions of dollars that AGCO is prepared to spend over the next five years.

The suggestion that Same Deutz-Fahr and Claas are potential candidates appears to confuse potential bid-making with on-going discussions about collaboration and marketing deals. AGCO already has a reciprocal tractor supply agreement with Same Deutz-Fahr and puts the MF brand on two Claas combines in North America. Both companies are privately owned, successful and looking to expand - not sell out.

Italian tractor maker Landini looked a more likely candidate until recently when its privately-owned holding company, Argo, increased its majority shareholding to 75% by purchasing share capital from partners AGCO and Iseki. This has reduced AGCO's interest (through Massey Ferguson) from 29% to just under 15%.

Landini retains a close association with AGCO nonetheless, since Landini and MF sell tractors to each other. They are joint partners in MF's Italian distribution company and (since 1995) AGCO is the exclusive Landini distributor in the US and Canada.

Danish combine maker Dronningborg is also in the front line, since Massey Ferguson has a 25 percent sharehold. But since it also has exclusive worldwide marketing rights for Dronningborg's products, there would seem to be little to gain in purchasing the business outright.

Of the other candidates, Fendt is ultimately expected to fall into the clutches of one of the tractor majors. At present, however, it is a profitable and fiercely independent family-owned business that focuses on engineering strength and innovation and heads the large German tractor market.

France's Renault, which has a technical alliance with MF, and Finland's Sisu-Valmet, with which AGCO is reported to have had acquisition discussions, are considered likely propositions. Both head the sales league in their respective home markets but neither are thought big enough to survive alone in the long term. Also, both companies have unfashionable government share-holdings.